Leveraged Buyouts
In the corporate world, there are plenty of techniques you can use as a part of your merger and acquisition tactic. One of the most well-known financing techniques is a Leveraged Buyout of an LBO.
So, what exactly is a leveraged buyout? This refers to a financing technique that a variety of entities uses. Many, including corporations, individuals, investment groups,...
Management Entrenchment Hypothesis versus Stockholder Interests Hypothesis
Over the past years, antitakeover measures have changed and reached new levels of hostility. And it was accompanied by different innovations as well. These measures can be divided into two, preventative and active measures. To reduce the possibility of a financially successful hostile takeover, there are preventative measures put in place.
On the other hand, there...
Do Managerial Agendas Drive M&A
Managers of firms have their personal interests, and these may be different from the other company. For managers and CEOs, this may be for the purpose of extending their stay in their position. They may also have a managerial agenda of continuing to receive what in the United States are bountiful compensations and perks. This compensation in the form of money is on top of...
Diversification
Diversification refers to a process where a company grows outside its current category. Diversification assumed a significant job in the acquisitions and mergers. That occurred in the third merger wave, also known as the conglomerate era. In the 1960s, huge numbers of firms that developed into conglomerates. Were dismantled through different spin-offs and divestitures in...
Financial Synergy
The next topic in our Merger Strategy chapter is all about Financial Synergy. The financial synergy is all about the impact of a business merger or acquisition on the costs of capital to the acquiring firm or the combined partners.
The costs of the capital may be decreased significantly depending on the level to which financial synergy exists in a corporate...
Operating Synergy
Synergy is often used in the physical sciences. If two substances or influences combine to create a much greater impact together. What we refer to as synergy is the reaction to that merger. The effect of the merger must be greater than the sum of both factors or substances operating independently.
In business, synergy is simply the 1 + 1 = 3 effect. It is where...
Is Growth or Increased Return the More Appropriate Goal?
Without a doubt, the achievement of growth is a company’s management and board’s major goal. However, it must be guaranteed by managers that growth is also what would generate good returns for shareholders. Sometimes, management should keep their company at a stable size while generating good returns, but choose to go with aggressive growth instead. Boards should always...
M&A Research: Event Studies
Most empirical studies utilize the statistical method called event studies.
Event analysis is conducted to evaluate and quantify the impact of a major catalyst incident or event on a company’s market value. Although it is mostly used in empirical financial research, experts in other disciplines, Such as accounting, management, and forensic economics have also been...
European Competition Policy
As a closing to our Legal Framework chapter, we will discuss the European Competition Policy. In this article, you will learn about the European Union, the EU Merger Control Procedures and more.
European Competition Policy
The European Union adopted what is most commonly referred to as the merger regulation as of December 1989. However, the merger regulation...
Measuring Concentration and Defining Market Share
The market share of the alleged violator of antitrust laws is one factor that courts rely on during antitrust cases, as well as the degree of concentration in the industry. Varying standards and methods in measuring market share and concentration of the Justice Department have been changing through the years. They have also been set forth in various merger guidelines....
REGULATION OF INSIDER TRADING
There are remedies for shareholders who have had losses due to insider trading specified by the SEC. The SEC Rule 10b-5 bound insiders, stating that the insider is required to disclose or abstain from trading the securities of the firms.
This rule derives from an SEC response to a 1940s complaint regarding a company that provided indications. That earnings would...
U.S. STATE CORPORATION LAW AND LEGAL PRINCIPLES
There are major issues concerning US state corporation laws. As well as legal principles underlying some court law rulings that have analyzed these statutes. Here are some of them.
Business Judgment Rule
This term refers to the standard where corporate directors are judged. They exercise their fiduciary roles when trying to employ a takeover. Here, it is presumed...